CALIFORNIA: The rally in tech mega-cap stocks picked up momentum, the Nasdaq 100 hit a record high in the first half of the year, and Apple hit the $3 trillion milestone.
Traders decided to see the glass half full as data showed inflation was easing, even at the expense of growth. Tech companies have bolstered their leadership amid the rise of artificial intelligence, further boosting stock prices this year. Big banks posted their first monthly gains since January after passing the Federal Reserve’s (Fed) stress test. Later in the day, JPMorgan Chase, Wells Fargo, Morgan Stanley and Goldman Sachs Group all announced dividend increases.
Since the beginning of the year, the Nasdaq 100 has gained nearly $5 trillion in corporate value, and tech-focused indicators have soared nearly 40 percent, ignoring bubble warnings. The rise of the S&P 500’s most influential group will push the index up 16% in 2023. When narrowed down to the megacap segment, the rise was even more pronounced, jumping 74%.
“I still love big tech,” Raymond James chief investment officer Larry Adam told Bloomberg TV. “I believe technology will continue to reinvent itself.” – Clearly, the latest addition is AI. That will continue to drive up earnings. ”
The “Big 7,” including Apple, Microsoft, Alphabet, Amazon.com, Meta Platforms, Nvidia and Tesla, boosted profits by 14% annually over the decade to 2022. Meanwhile, last year’s total profit he fell by more than 20%. is expected to recover quickly.
The Nasdaq 100 rose more than 1.5% on Friday while the S&P 500 hit its highest level since April 2022. US equity benchmarks hit their best first half since 2019. Nvidia, which nearly tripled this year, is up about 3.5%.
If history is any guide, this year’s Nasdaq 100 strength will continue for the rest of 2023.
Years with an index gain of at least 10% average second-half returns of about 14%, while first-half gains of more than 20% narrow to an 8.3% gain. Analysis of data compiled by Bloomberg.
Market interest in the power of generative AI could potentially dampen sentiment this year, including recession fears, rising inflation levels, prospects for another Fed rate hike, geopolitical risks, debt ceiling debate, and fiscal collapse. It has overcome every major problem that exists. Few local banks.
AI’s rise has been compared to the dot-com bubble of 2000, when the market was driven by a similarly narrow range of tech stocks before the crash, but BlackRock’s Tony Despirito sees profit growth coming said.
“The demand is really real,” said Despirito, the firm’s chief investment officer for U.S. fundamental equities. “It’s a contrast between AI and what’s happening in his year-old metaverse, or virtual reality. The orders are there.”
Still, after such a surge, valuation concerns have mounted, fueling a recent surge in bearish bets on big tech companies. Data compiled by S3 Partners show short-selling as a percentage of tradable stocks is near a 12-month high for Microsoft, Tesla and Amazon.
“Be selective”
“We don’t think the AI trend is a bubble, but the strong rally so far this year has encouraged investors to be picky about AI stocks,” said Sundeep Gantry, equity strategist at UBS Global Wealth Management. I am advising you,” he said. “From a positioning perspective, we recently ended the self-help theme as we see improved risk-reward in mid-cycle industries (software, internet) and high-tech laggards.”
Times Square is reflected in the windows of the Nasdaq Marketsite in New York, USA on Friday, June 30, 2023. The explosive rally in tech stocks picked up further momentum on Friday, with the Nasdaq 100 poised to set a new record for the first half of the year. one year.Photographer: Victor J. Blue/Bloomberg
Image credits: Bloomberg
“Until evidence of a more prevalent overbought situation merges with more bullish sentiment, and evidence of fading defensive and technical ranges, when technical trends are largely unimpaired. And it would definitely be wrong to consider abandoning this rally based solely on overbought conditions,” Newton said. I got it.
The tech sector on Friday also benefited from subdued bond market activity. The 10-year U.S. Treasury yield fell to about 3.8%. The dollar has weakened, widening losses this year.
Key indicators of US inflation slowed in May, and consumer spending was also sluggish, suggesting that the economy’s main engine is starting to lose some momentum. The Personal Consumption Expenditure Price Index, one of the Fed’s preferred inflation measures, rose 0.1%. The measure was cut from a year ago to 3.8%, the lowest annual growth in more than two years.
Evercore ISI vice chairman Krishna Guha said: “The May PCE report released today is relatively benign from the Fed’s point of view, and ultimately the Fed will raise rates just one more, not two more.” “We are leaning towards raising rates.” “This should moderate the recent rally in yields slightly and favor big tech stocks.”
Elsewhere, Brent Oil posted its longest quarterly loss in more than 30 years, amid persistent concerns about strong supply and demand.
Global indicators settled below $75 a barrel on Friday, their fourth consecutive quarter of losses, while the West Texas Intermediate posted its first consecutive quarterly decline since 2019.
